9911796707
TMI Blog2014 (9) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... been held to be jointly and severally liable for payment of an amount of Rs. 10,46,088/-. 5. The facts giving rise to the present petition are that the petitioners herein are the Directors of a private limited company by the name of 'Miraa Processors Pvt. Ltd.' (hereinafter referred to as "the Company"). The company submitted a nil return of total income for the assessment year 2003-04. Subsequently, the matter was taken up for scrutiny under section 143(3) of the Act and by an assessment order dated 30.12.2005 the total income of the Company came to be determined at Rs. 32,74,428/- by making the following additions; (I) Brought forward capital loss Rs.11,69,554/- (II) Sundry creditors u/s.41(1)(a) Rs.18,72,597/- (iii) Bad debt Rs.2,32,277/- 6. Against the above assessment order, the Company preferred an appeal before the Commissioner of Income-tax (Appeals) [hereinafter referred to as CIT (Appeals), who deleted the amount of Rs. 18,72,597/- added towards outstanding sundry creditors and claim of bad debt of Rs. 2,32,277/- totaling to Rs. 21,04,874/-. Against the order of Commissioner (Appeals), both, the Company as well as the Department, went in appeal before the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and held them jointly and severally liable for payment of the amount of Rs. 10,46,088/-. Hence, this petition. 9. Mr. J.P. Shah, learned counsel for the petitioners, submitted that the condition precedent for exercise of powers under section 179 of the Act against the directors of a company is that the tax cannot be recovered from such company. Referring to the notice under section 179 of the Act, it was submitted that there is not even an allegation therein to the effect that the tax could not be recovered from the Company. 9.1 Referring to the impugned order, it was submitted that the Assessing Officer has not addressed the issue from the perspective as laid down by this court in the case of Maganbhai Hansrajbhai Patel v. Assistant Commissioner of Income-Tax and another, (2013 ) 353 ITR 567 (Guj.), inasmuch as, there is no finding to the effect that there was any gross negligence, misfeasance or breach of duty on the part of the directors resulting into non-recovery of the tax dues of the private limited company where they were directors. On the contrary, the Assessing Officer has focused on the point as to whether the tax demand has arisen because of the inaction on the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners gave a reply through their Chartered Accountant stating that the non-recovery of the amount in question cannot be attributed to any gross neglect, misfeasance or breach of duty on the part of any of the directors in relation to the affairs of the Company in view of the facts stated therein. The grounds put forth by the petitioners were that the demand had arisen on account of refusal of the claim by the Assessing Officer to give set off of the brought forward short term capital loss of Rs. 11,69,554/- due to delay in filing the return of income under section 139(1) of the Act within the prescribed time limit. That the delay in filing the return was on account of the fact that the company had stopped its manufacturing activities from 30.11.1999 and the staff had been retrenched. Nonetheless, the return under section 139(4) of the Act had been filed voluntarily. It was further stated that the petitioners, in view of the loss sustained by the Company, have lost their investments in the form of share capital and unsecured loans given to the Company. The respondent-Income Tax Officer, in the impugned order, has observed that in spite of all efforts, demand could not be recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the revenue to establish that such recovery cannot be made against the company and then alone it can reach the directors who were responsible for the conduct of business during the previous year in relation to which liability exists. On the question as to whether in the facts of the said case, the respondent Assessing Officer was justified in ordering recovery against the petitioners therein, the court recorded that the authority completely failed to appreciate in proper perspective the requirement of section 179(1) of the Act. The court observed that once it is shown that there is a private company whose tax dues have remained outstanding and the same cannot be recovered, any person who was a director of such a company at the relevant time would be liable to pay such dues. However, such liability can be avoided if it proves that the non-recovery cannot be attributed to the three factors mentioned in the said order. Thus, the responsibility to establish such facts is on the director. However, once the director places before the authority his reasons why it should be held that non-recovery cannot be attributed to any of the above three factors, the authority would have to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gence, misfeasance or breach of duty on their part is that, the petitioners, as directors, were responsible for the non-filing of return of income and that the demand in question had been raised due to the inaction on the part of the directors. Clearly, therefore, the entire focus and discussion of the respondent in the impugned order is in respect of the petitioners' neglect in the functioning of the company when the company was functional. On a plain reading of the impugned order, it is apparent that nothing has been stated therein regarding any gross-negligence, misfeasance or breach of duty on the part of the petitioners due to which the tax dues of the Company could not be recovered. The respondent, has, therefore, passed the impugned order under section 179(1) of the Act against the directors in respect of alleged neglect on their part in the functioning of the Company due to which the demand in question has arisen and not on account of any gross neglect, misfeasance or breach of duty on their part in the nonrecovery of the dues of the Company. Thus, the very basis on which the respondent has proceeded, suffers from nonapplication of mind to the requirements for exercise of p ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
